” Pakistan’s external debt soars by $1.2 billion in six months: report ” | NewsPKOnline

ISLAMABAD: The Ministry of Economic Affairs (MEA) reported an increase of $1.2 billion in Pakistan’s external public debt over a six-month period, reaching $86.358 billion by September 30, 2023. According to the ministry’s inaugural quarterly report on Foreign Economic Assistance (FEA) for the ongoing fiscal year, Pakistan received a total of $3.5 billion in foreign inflows between July and September 2023. This was offset by loan repayments amounting to $1.5 billion, resulting in a net inflow of $1.97 billion.

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The MEA noted that approximately 64 per cent of the overall external public debt was sourced from multilateral and bilateral channels, offering concessional terms and extended maturity periods. Comparatively, as of March 31, 2023, the external public debt was recorded at $85.18 billion.

During the same period in the preceding fiscal year (July-September 2022), Pakistan acquired $2.2 billion in loans and repaid $2.06 billion, resulting in a net addition of $142 million.

The FEA report highlighted that Pakistan secured new agreements totalling $642 million in fresh commitments during the first quarter of the fiscal year. These commitments were financed by multilateral development partners due to challenging market conditions, including poor credit ratings and unaffordable interest rates.

The primary focus of these commitments, accounting for 69 per cent, was on project financing, with 15 per cent allocated to programme financing and 16 per cent to commodity financing, prioritising efforts to mitigate the aftermath of the 2022 floods.

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Disbursements during July-September 2023-24 amounted to $3.538 billion, primarily sourced from project and programme loans and grants provided by multilateral and bilateral development partners and financial institutions. Additionally, the International Monetary Fund (IMF) released $1.2 billion as the first tranche of the $3 billion Stand-By Arrangement (SBA) on July 13, while the United Arab Emirates contributed $1 billion separately, accounted for by the State Bank of Pakistan (SBP).

The World Bank ($306 million) and Islamic Development Bank ($100 million) were among the significant contributors among multilateral development partners. On the bilateral front, China led with disbursements of $509 million, followed by Saudi Arabia with $300 million allocated for oil and petroleum product imports.

The FEA report revealed that Pakistan serviced $2.404 billion during the first quarter of the fiscal year for external public debt, with principal repayments accounting for $1.627 billion and interest payments for $777 million. Consequently, the net transfers to the government’s external public debt amounted to $1.869 billion.

Of the total inflows of $3.54 billion in public debt, $2.204 billion (62 per cent) was allocated for balance of payment or budgetary support. This included $2 billion in safe time deposits, $817 million in bilateral financing, and $474 million in multilateral support, excluding the IMF, which is managed separately by the SBP. An additional $204 million was received through Naya Pakistan bonds.

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During the first quarter (July-Sept 2023-24), disbursements in programme financing, project financing, commodity financing, and budgetary support facilitated economic reforms, development activities, and bolstered the balance of payments. The report underscored that a significant portion, 64 per cent, of the total external public debt, was secured on concessional terms with extended maturities.

Providing a sectoral breakdown, the MEA outlined disbursements primarily for flood relief ($101 million), energy and power ($64 million), water sector ($52 million), transport and communication ($34 million), health and nutrition ($29 million), agriculture ($25 million), and physical planning and housing ($22 million) in total project assistance.